Malboro Maker Invests $2.4 Billion into Cannabis Company-T.CRON-P.CANNABIS

Mike Gorenstein marijuana firm Cronos Group's founder and CEO speaks during an interview in New York U.S

Marlboro cigarette maker Altria on Friday became the latest major company to explore an entry into the legal cannabis market as more states approve the once-taboo substance for medical or recreational use.

The arrangement also allows for Altria to invest up to a further $1.4 billion to increase its ownership stake in Cronos to 55%.

Altria's total investment will be in the same league as the $4 billion spent earlier this year by Constellation Brands to acquire shares of Canopy Growth Corp., another Canadian pot producer.

"Altria's experience is very wide-ranging - not just in tobacco, but in adult beverages in different categories and decades of experience in how to bring different products to market", Cronos Chief Executive Officer Michael Gorenstein said on a call with analysts. "The proceeds from Altria's investment will enable us to more quickly expand our global infrastructure and distribution footprint, while also increasing investments in R&D and brands that resonate with our consumers".

Altria's investment marks the latest move by a US company in an established industry to tap the burgeoning Canadian cannabis industry.

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Canadian marijuana company, Canopy Growth, for example, has received a multibillion dollar investment from Corona owner Constellation Brands, CNN reported.

As well, US tobacco leaf merchant Alliance One International said its subsidiary acquired a 75 per cent equity stake in Charlottetown-based Canada's Island Garden in January.

The biggest companies have avoided investing in USA cannabis businesses, which are legal in a handful of states, because of the federal prohibition on the drug. That is a 16.2% premium over the stock's Thursday close, according to Reuters. There is also a warrant giving Altria the right to purchase additional shares at $14.25 a share over the next four years.

Cronos said it will use the capital to accelerate its global growth and expansion, as well as research and development.

Altria has been grappling with the steady decline of tobacco smoking rates and sees potential to tap into a new segment of growth as marijuana moves into the mainstream.

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